NBC Universal Exec Describes Content Challenge at Darden Leadership Lecture

Oct. 4, 2007 — NBC Universal will protect its video content from the fate that has befallen the music industry, company President and Chief Executive Officer Jeff Zucker told students at U.Va.’s Darden School of Business during a lecture this week.

The media giant has a contract with Apple through December to deliver video content via Apple iTunes, but Zucker said that in the wake of disagreements between the companies, the two already have essentially ended their business relationship. NBC Universal content is no longer available through iTunes, he said, while NBC Universal explores different online distribution models.

At the Oct. 2 lecture, Zucker said a key issue is the pricing model Apple uses to sell content that can be downloaded onto the wildly popular iPod. Under current contracts with music content providers, Zucker said Apple uses an à la carte pricing system in which every song in the catalog is available for 99 cents. Video programs through iTunes typically cost about $2.

Under terms of the expiring contract, Apple — not NBC Universal —also gets to set the wholesale price it pays NBC Universal to acquire content for distribution. For every other distributor of NBC Universal content, it is NBC Universal that sets the wholesale pricing.

Zucker said it is ironic that Apple "enjoys complete flexibility" in how its products are priced, everything from the selection of product features to the venues through which they are sold. Apple also has resisted demands to install protections against piracy on new iPods. That’s unacceptable, Zucker said, noting that he made a strategic decision to end the Apple relationship because he feared that, in a few years, NBC Universal would lose control over its own content, costing the company both lost content value and revenue loss due to piracy.

“Content providers need pricing controls,” he said. Pointing to the music business, Zucker said when the industry fell in line with plans to sell songs individually and online for about $1 each, the move effectively killed the CD market for more profitable album sales. “The music industry has subsidized Apple by agreeing to low pricing.”

Zucker said it was a difficult decision to cut ties with Apple because, until recently, NBC Universal was the No. 1 content provider to iTunes. He also had “many conversations” with Apple CEO Steve Jobs before reaching his decision.

“They think we are going to fold,” Zucker said. “We are not.”

Zucker punctuated his presentation with video clips of NBC Universal’s rich legacy in the entertainment and news industries, as well as clips from popular NBC programming including “Saturday Night Live” and “The Office” with Steve Carell. He also shared an anecdote from his Harvard days as a student newspaper editor when future late-night comedian Conan O’Brien worked at a competing publication, the Harvard Lampoon. Zucker said O’Brien arranged one night to have all Zucker’s newspapers replaced with a spoof containing phony news. So Zucker said he had O’Brien arrested.

For years O’Brien would not let Zucker forget the incident, “until one day I became his boss,” Zucker said, smiling. “Late Night with Conan O’Brien” is broadcast on NBC.

Remarks by the five-time Emmy Award-winning Zucker were part of the Darden Leadership Lecture Series, an ongoing dialog between Darden students and top-level corporate, government and industry leaders who discuss current business issues and trends, and their own individual leadership philosophy. Zucker's presentation was similar to the case studies that Darden students are required to examine during their MBA experience. Case studies focus on real-world business problems that challenge students to devise viable solutions — and to be prepared to deal with the consequences of their decisions.

Zucker was named president and CEO of NBC Universal in February 2007. With annual revenues of more than $16 billion, NBC Universal is one of the world’s leading media and entertainment companies.

Zucker has had a diversified 20-year career with NBC as a producer and business leader. He served as president of the NBC Universal Television Group from May 2004 until December 2005. Before that, he was president of the Entertainment, News & Cable Group since December 2003, and president of NBC Entertainment since December 2000. Before taking the helm of NBC Entertainment, Zucker spent nearly eight years as the executive producer of NBC News’ Today Show.  At age 26, he became the youngest executive producer in the history of the top-ranked morning news show.

Zucker joined NBC in 1986 as a researcher for NBC Sports’ coverage of the 1988 Summer Olympic Games in Seoul, South Korea. During Zucker’s tenure as head of NBC Entertainment, NBC’s primetime, late-night and daytime lineups all finished first in the key adults 18-49 demographic category for three consecutive seasons — a feat unmatched by any other network.

About U.Va.’s Darden School
Founded in 1955, the Darden School of Business is a professional school that works to improve society by developing leaders in the world of practical affairs.

Questions or comments regarding this story can be sent to: communication@darden.virginia.edu.